Maximum rate of traded power now fixed at Rs 8 per unit

Providing a major relief to the power-starved state utilities, the Central Electricity Regulatory Commission (CERC) has capped the rate
of power traded in power exchanges and through bilateral agreements at Rs 8 per unit. This order is applicable to power traded on a day ahead basis and will remain in force till October 26.

Earlier, the CERC in an interim order had capped the power rates at Rs 11 per unit. Alarmed by a sharp increase in rates of power traded on a day ahead basis, the commission had taken suo motu cognisance of the disturbing trend and issued an interim order in August.

The commission stated in the interim order that in a span of ten days there was a 2.37 times increase in power prices in the Indian Electricity Exchange (IEX). The prices had increased by 3.22 times in Power Exchange India Ltd (PXIL). A volume of electricity sold at extremely high prices was quite high and the price power during all times of the day was abnormally high, the order stated.

The commission then held a public hearing on September 8, which was attended by representatives of power distribution companies, power traders and private power plants. Traders and power plants argued that imposing a price cap would send a contradictory signal to investors which might affect fresh investments in the sector. However, buyers stressed that the proposed price cap of Rs 11 per unit was too high and it should be lower keeping in view the generation cost of most power plants.

CERC stated in the order that the distribution companies were refraining from load-shedding as much as possible and are trying to buy power at high cost so that they can maintain standards of performance. Such buying decisions, apart from affecting the financial health of the distribution companies, are also passed on in the tariff payable by consumers.

On account of unforeseen bad monsoons and drought-like conditions, the prices and volatility had risen significantly. Such abnormally high prices, even for a short period, was not only harmful to the consumers but would also erode the buyer's confidence in the market's credibility, the order stated.